Independence gloom unwarranted
Michael Quinn, 15 December 2011
Ground control problems at the Jaguar zinc-copper mine in Western Australia have been a headache for Independence.
WHILE the acquisition of Jabiru obviously hasn’t gone exactly to plan for Independence, the criticism of Independence seems a little wide of the mark. Since when did takeovers in the resources sector not come with risk?
The basis for the Independence-Jabiru deal was that the Jaguar mine would generate sufficient free cash flow to help fund Bentley and other development obligations. Meanwhile, Independence was to put its expert exploration shoulder to the wheel and get to work on a VMS prospective corridor stretching over some 60km.
However, according to a Macquarie note to clients this month (post a $A118 million equity raising), horizontal fractures in the high-grade massive sulphide ore created an unsafe work environment, requiring a new mine plan of footwall drives, angle blast hole drilling and back filling of stopes.
Jabiru’s Jaguar was a mine that had been in operation for some time when Independence acquired it, and if production targets were being met, and Independence’s due diligence didn’t turn up any gremlins, then game on.
The critics would seem to be suggesting Independence didn’t do enough homework, aka due diligence.
But exactly how much due diligence can be taken in the real world if transactions are to occur?
Underground nickel miner Independence has attained a decade of underground mining expertise over the “journey” at the Long nickel mine, and presumably the company was comfortable with what it was getting into at Jaguar. But underground mining’s a risky business, and clearly unforseen issues are likely to have a major impact.
Was Independence just caught by bad timing? That seems the insinuation from Independence’s perspective: “In the June 2011 quarter, leading up to IGO gaining 100% control of the Jaguar assets, geotechnical issues arose in the Jaguar underground mine,” the company said in October.
Clearly though Jaguar has taken a bit of a bite out of Independence’s well deserved credibility.
Some speculation has it that Jabiru was acquired to ward off the attentions of AngloGold Ashanti, the major owner of the Tropicana project.
But would AngloGold really be deterred by the acquisition of Jabiru if it believed Tropicana was a 10-20 year project (and possibly more) in a brand new gold province? Surely, as with the Long nickel mine, it would just sell the Jabiru assets too.
So unless the critics are suggesting Jabiru is more or less worthless, it is hard to see the basis for that speculation.
Macquarie can certainly see big value in Tropicana.
Its note suggested Tropicana “will be worth the wait”, and says the joint venture area is “likely to host over 10 million ounces” and be a “significant contributor” to Independence’s growth plans.
“Investment in Tropicana green-and-brownfields exploration and Havana development is a no brainer,” Macquarie said.
The investment bank also likes the look of the Karlawinda gold project.
“At Karlawinda wide, medium grade ore shoots, gentle dip and around 3km along strike mineralisation all suggest this could be another large, low production cost gold deposit,” Macquarie said.
Meanwhile, the good news at Jaguar is that the ground issues have been “largely rectified” and the operating stopes are moving towards the higher grade and copper rich core of the VMS system. In addition the Bentley mine is being commissioned and it is seen as having wider ore, better ground conditions and more brownfields exploration potential than Jaguar.
And exploration drilling goes on north and south of Jaguar-Bentley.
Jabiru has been a hiccup to be sure, but it’s far too soon for any doom and gloom.
Also in the December 15 - 21, 2011 edition
- AFRICA
- Eritrea risk narrows Zara field
- ASIA DESK
- Not all good as gold in China
- AUSTMINE
- MST buys Nixon Communications
- BREAKING NEWS
- Abenab progress for Avonlea
- Alara advances
- Alcoa declares divi
- Alcyone search boost
- Better news for St Barb
- Black Fire complies
- Bu Dun Hua copper
- Chief sees higher rating for Endeavour
- Cockatoo extension
- Impala sacks drillers
- Industrea win
- Kingston shines
- Maiden Rosie resource
- More Bass trouble
- More concerns on uranium supply
- Nany option exercised
- Newcrest output up
- Palito reassessment
- Pegasus finds copper
- PGM output up
- Radar on track
- Redhill expands holding
- Rio in control
- River attraction for Silver Lake
- Southern Cross ready to move forward
- Stonehenge sets sights high
- Straits gain
- Strategic permit
- Tanoyan update for Reliance
- Trafford's exploration boost
- Two Rivers death
- Ventnor copper hits
- WA uranium policy
- West Rand mines to merge
- Windfall at lake
- Winmar attracts investor
- Yellowhead on track
- CENTRAL ASIA
- Can miners really side-step a war?
- COAL
- Mardon's new year wish
- CONSULTING
- Consultants see room to grow in 2012
- Lory leads SKM mining into new growth phase
- CONTRACTING
- Contracting briefs: Redpath, Thiess, Decmil
- FINANCE
- A golden path to Dubbo development
- Copper deficit a fixture for the future
- Kagara opts for safety first
- Money’s almost too tight to mention
- Terramin view expected to become clearer
- FORUM
- How the JORC and Valmin codes work
- More must buy into JORC discussion
- FROM THE CAPITAL
- Capital management will be key 2012 theme
- GOLD
- Loyal to the cause
- Upside seen despite Teranga downslide
- HEAVY METAL
- Atlas Copco expands mining range
- ISSUES
- State-run miners: best of a bad bunch
- MINING INTELLIGENCE
- 'tis the season (still) to be wary
- MINING IT
- Auto-money changes everything
- Innovation is the new black
- IT notebook: ARANZ Geo, Immersive Technologies
- IT notebook: Devex receives certification
- IT optimists
- Mining IT: 2011 rebooted
- Mining IT: product releases to fill 2012 calendar
- XPAC to lead dynamic software revival
- PEOPLE
- People on the move: Gindalbie Metals, Abcourt Mines, Carbon Energy
- SOUTH AMERICA
- Chili backers like its prospects
- VIEW FROM THE WEST END
- Bitten on the bum by a Black Swan